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A writer who reported that Zhang Ziyi had gotten $100 million for sexual favors to Chinese officials had argued that people would be killed if he revealed the identity of his sources.

Zhang Ziyi has reached a settlement in principle to settle a high-profile defamation lawsuit with political ramifications, The Hollywood Reporter has learned.

In June, 2012, the actress sued U.S.-based China Free Press and journalist Weican Null Meng, who writes for the Chinese dissident news website Boxun, over a since-retracted report that claimed she is a prostitute who has earned more than $100 million for having sexual relations with high-ranking Chinese officials. The defamation lawsuit alleged that the report was false and ruined potential endorsement deals for Zhang with luxury designer brand Michael Kors, French automaker Citroen and others.

The litigation took quite a turn earlier this year when Zhang demanded that defendants give up sources who had claimed that Zhang had been hired as a prostitute by Community Party officials, including the ousted Bo Xilai.

The journalist argued that to give up his sources would be costly. Meng's attorney said in court documents that the defendants faced a Hobson's choice: "Either divulge their anonymous sources inside the People's Republic of China so that they may be subject to cruel, unusual and inhumane persecution, or surrender their own rights to free expression under the United States Constitution."

In response, Zhang's lawyers argued that "if reporters are permitted to write false statements and then hide behind anonymous sources known only to them allegedly out of concern about what might happen to such sources if they are disclosed, they can say whatever they want with impunity."

The issue was set to be determined by a Los Angeles judge, who was shown a declaration by David Ardia, a media law professor at the University of North Carolina, who reviewed materials and offered the opinion that "there is no basis to correct or retract the stories at issue in this case."

Then suddenly, on the eve of a hearing, the case was transferred to a new judge, leading to months of delay. When the parties regrouped in August with some new lawyers, the judge ordered another mediation.

On Thursday, the parties informed the court that they had reached a confidential settlement in principle. An attorney for China Free Press confirmed the news but wouldn't reveal the terms or whether any sources were given up. UPDATE: An attorney for Zhang has e-mailed us to point out that Boxun News has retracted the report about the actress, writing the "false reports about Zhang Ziyi should never have been published."